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Investing in a Better Life

Cecilia E. Rouse is the Lawrence and Shirley Katzman and Lewis and Anna Ernst professor in the economics of education, at the Woodrow Wilson School of Public and International Affairs at Princeton University.

Updated January 13, 2015, 5:30 PM

The measure by which to judge whether or not our society devotes too much time and money to education is if the costs of providing the schooling outweigh the resulting benefits. To date, we have not crossed that threshold. A high school graduate still earns about 45 percent more than a high school drop out, and a college graduate (with no further education) earns over 50 percent more than a high school graduate. These differences add up over a lifetime. For most students, taking out a loan to finance this investment will generate a worthwhile return.

We could improve outcomes if we spent more on, for example, increasing teacher pay to attract the best and brightest and reducing class sizes.

More generally, better-educated workers not only enjoy higher income, but also better health, decreased likelihood of committing crimes and less reliance on social programs. As such, not only are there important benefits to the individual of attaining higher levels of education but also to the rest of society.

Does this mean that our educational system is perfect? No, and we could certainly do better with the money that we currently spend at all levels. As one example, studies have documented that well-designed and well-implemented school accountability systems can improve student outcomes at low cost; at the post-secondary level, institutions must find ways to increase productivity as well. But spending more money is not necessarily wasteful: we could also improve outcomes if we spent more by, for example, increasing teacher pay to attract the best and brightest and reducing class sizes.

All signs suggest that the need for a strong education system will continue to grow as employers increasingly demand workers with strong analytical, interpersonal and communication skills. Innovative and productive workers are essential for strong economic growth. In these trying economic times, we should be looking for ways to effectively increase our investments in education, not cut them.